Time to boost FDI to grow GDP — John Mahama

Former President John Dramani Mahama has underscored the need for the country to boost foreign direct investment (FDI) inflow to make up for the shortfall in borrowing from the international capital markets.

At a time when FDI inflow is fast dwindling, he said, measures to attract new investments were necessary, particularly in the next four years, to help maintain a robust gross domestic product (GDP) growth.

“The issue of FDI for Ghana is even more crucial now than ever before. With Ghana’s default on international debt and our temporary shutout from the international capital market, boosting FDI inflow for Ghana will be critical over the next four years in maintaining robust GDP growth,” he said.

Former President Mahama made the call at a forum in Accra on the theme: “Future of Foreign Direct Investment in Ghana” in Accra last Thursday.

The forum, dubbed “Distinguished Speaker Series on FDIs”, was put together by a consortium of trade associations and business chambers for the various presidential flag bearers to share their perspectives on how to take FDIs into the country to the next level when a new administration takes over the mantle of government.

The consortium includes the American Chamber of Commerce in Ghana, the Ghana Netherlands Business & Culture Council, the Spain-Ghana Chamber of Commerce, the Ghana South Africa Business Chamber, the Canada-Ghana Chamber of Commerce, the Japan External Trade Office and the Chamber of Commerce & Industry, France.

Context

Placing his call in the right context, former President Mahama said: “In spite of the expansive and catalytic role of FDI in development, Africa in general and Ghana in particular, have had relatively limited FDI inflows to supplement domestic capital formation”.

The participants

In 2023, for example, he said there was not a single African country in the top 20 destinations for FDI when Europe and Asia topped the list.

“In fact, the continent received only $53 billion in FDI out of the total of $1.4 trillion, the lowest of any region in the world, developing Asia received $621 billion, while Latin America and the Caribbean received $193 billion,” the former President stated.

Former President Mahama, who is also the flag bearer of the National Democratic Congress (NDC), held the strong view that for Ghana to target and make the most effective use of FDI, the country must be mindful of the various forms of FDI, as described by the United Nations Conference on Trade and Development (UNCTAD) in the various issues of its annual publication, World Investment Report.

“Mergers and acquisitions (M&Es), which involve literally the merging or the acquisition of existing businesses, is more prominent in FDI for advanced economies than they are for developing countries, especially Africa,” he said.

The second category, project finance, particularly for infrastructure, was perhaps the most important for African economies due to the large infrastructure deficit faced by the continent, Mr Mahama said.

The third category, he said, were greenfield investments, which involved the construction of new factories or offices by investors from the ground up.

For Ghana, former President Mahama said when voted into power, the country’s immediate interest would be in the latter two, “although preference will be given to other categories as we see fit within the priorities of the government’s development agenda”.

Factors to address

The former President also identified some factors by some key players in the FDI space in Ghana which he would urgently address.

These include the proliferation of ill-coordinated, and sometimes ill-conceived regulations, laws and/or policies; conflicting mandates of certain state regulatory agencies; and violations of the sanctity of contracts and protracted and inefficient procedures for resolving business disputes.

The others are poor quality of government services such as the issuance of licences for businesses; macroeconomic instability, as manifested in high rates of inflation and an unstable cedi, both of which make it difficult for businesses to plan into the future; a punitive fiscal regime in the form of high tax rates and the frequent and haphazard introduction of taxes with no regard for their impact on businesses and consumers; and high cost of credit, which makes it difficult, even for foreign firms with deep pockets, to access working or investment capital.

The rest are corruption among government officials, some of whom make unreasonable demands on investors; inconsistencies in the interpretation of the laws related to taxation and local content policies, among others; weak logistics network involving inefficient infrastructure for transportation, storage and distribution, including cumbersome processes at the ports.

“With respect to international trade, the business community has listed the following specific complaints among its concerns,” former President Mahama said and pledged his commitment to tackle them when voted into power.

Continuous engagement

The President of American Chamber of Commerce (AMCHAM) Ghana, Kimathi Kuenyehia, who spoke on behalf of the trade associations and chambers, said the platform was crucial as it allowed high-profile government officials to engage with investors to boost FDI inflows.